Sterling steadies

Sterling steadied close to a seven-year high against the euro and trimmed losses against the dollar on Friday, helped by a rise in British retail sales on a day dominated by the single currency's biggest collapse in more than three years. By late afternoon in London, the pound had clawed its way back after a fall to an 18-month low below $1.50. It was up almost 1 percent on the day at 75.085 pence per euro, well off a seven-year high of 74.295 pence hit earlier.
On a dramatic day on major currency markets, the euro sank to as low as $1.1115, a fall of four full cents in the 24 hours after the European Central Bank announced its first programme of outright money-printing. "Cable as most of us expected at the start of today has been dragged lower on the euro's coat tails," said a dealer with one bank in London. "The pace has just been somewhat slower."
British retail sales volumes rose 0.4 percent in December after surging by 1.6 percent in November, the strongest growth in more than a decade. Economists had expected a fall of 0.6 percent on the month. "The numbers did provide some relief to sterling/dollar as some in the market were positioned for a drop in retail sales," said another London-based spot trader.
While a retreat in expectations of a first rise in Bank of England interest rates into next year have helped knock 20 cents off the dollar exchange rate, Britain's economy still looks in far better shape than its European peers. The difficulty is that any concern over its biggest export markets is likely to reflect badly on British business, already the source of a huge current account deficit to go along with one of Europe's bigger government debt burdens.
"The UK is faced with fiscal tightening and political policies which appear unattractive to foreign investors regardless of who wins the general election in May," analysts said from Morgan Stanley said in a note revising most of its currency forecasts. "As a result we have taken our already GBP/USD bearish forecasts even lower."